More than a dozen homeowners are trying to stop foreclosure on their properties over a $1 million loan they say went unnoticed when they bought their homes.

Homeowners in Statesville’s Fox Den subdivision say they were stunned last year to learn their properties faced foreclosure over money the community’s developer borrowed a decade ago.

Attorneys say it appears the loan, which is still tied to the homeowners’ properties, was not discovered during title searches when the homes were bought. About 16 homeowners and additional land in Fox Den are affected by the foreclosure, according to attorneys.

In a setback for the homeowners, an assistant clerk of court in Iredell County ruled last month that a foreclosure sale can move ahead. The sale is on hold while the homeowners appeal.

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The foreclosure stems from money lent in 2003 to Fox Den Development Co. to develop the fourth phase of the golf course community just west of Interstate 77.

The late Dwight Goforth, one of the development company’s investors, made the loan, which court records show is unpaid.

Goforth’s three children are now seeking repayment of the loan and pursuing the foreclosure. Last year, the homeowners received letters saying $4.6 million in principal, interest and attorneys fees was owed on the Goforth note. A foreclosure process would begin if the full amount was not paid, the letters warned.

Homeowners stuck in the middle of the complicated dispute say it has brought stress and uncertainty.

“Me and my neighbors, we’re at a loss here because we did everything right,” homeowner Allan Zanotti said. “It’s like the sword of Damocles hanging over our head.”

Zanotti said he and his wife, Lynn, have lost sleep worrying about the future of their home, which they had built in 2008 for $292,000. They said they have poured roughly $80,000 into improvements to their property, which overlooks the 11th green.

Lots didn’t sell

Fox Den Development Co. was formed in the 1990s to turn farmland in southern Statesville into a subdivision. Built in phases, Fox Den now has about 100 homes, an 18-hole golf course, tennis courts and a junior Olympic-size swimming pool.

The development company’s members put up money to develop the subdivision, acquiring an equity stake.

“We started out with 10 investors who invested $100,000 each to begin the project,” said Phyllis Edmiston, one of the investors, whose home abuts Fox Den. “Over a period of time ... we all invested much more than that to keep the project going.”

The plan was for Fox Den Development to sell lots to builders. Investors would eventually be repaid when the project became profitable, Edmiston said. But lot sales in Fox Den have suffered since the housing downturn, and the investors have never realized a profit, she said.

Statesville attorney John Greene, who represents Fox Den Development Co., said he was not aware of how much investors have put into Fox Den. It’s likely those investors have taken a loss, he said.

The Goforth estate loan was supposed to be repaid from the proceeds of lot sales, said David Price, an attorney for the Goforth children who is not representing them in the foreclosure action.

“Everything relates back to 2008 and the economic disaster,” he said. “To my knowledge, there’s not been a lot sold since.”

The clubhouse and driving range are part of the same foreclosure action, he said.

In a separate action, a limited liability company called Fox Den Acquisitions acquired the golf course and other property this year after Carolina Farm Credit initiated foreclosure when Fox Den Development Co. defaulted on other loans.

Loan wasn’t discovered

The homeowners say it’s hard to understand how the $1 million loan wasn’t discovered in title searches before they closed on their homes.

“I just think in this day and time, with all the computers, the technology (how) something like this was able to get this far and wasn’t caught?” Lynn Zanotti said.

Iredell County Register of Deeds Matt McCall said it’s common for developers to take out a construction loan to develop a site on which a subdivision will be built. As each lot is sold, it is released from the outstanding construction loan, he said. If a lot is not released from a prior lien, it could be foreclosed on to repay that debt.

“It’s usually the responsibility of the attorney preparing the title opinion to ensure that lot is released from the loan,” he said.

No closing attorney has been named in documents in the foreclosure action involving the Fox Den homeowners. Also, apparently no legal action has been taken against any closing attorneys as a result of the foreclosure action.

Attorneys say the homeowners have filed claims with their title insurance companies.

Legal experts say malpractice actions against lawyers are governed by North Carolina law and generally must be filed within three years but no more than four years from the last negligent act.

McCall noted that he’s never seen as many homes facing legal action at once because of lots not being released.

“Title issues happen fairly often, just not on this scale,” he said.

‘Basically a nightmare’

Price said the three Goforth children, who live in Florida, South Carolina and Virginia, did not intend for the foreclosure action to result in the homeowners being displaced. “It is their hope that no one loses their home,” he said.

Price said the money the children are trying to recoup represents only part of their father’s investment in Fox Den. Goforth died in 2004. His wife, Ethel, died in 2009. The Goforths were Statesville residents but did not live in Fox Den.

Price said the investment became their inheritance, “which they believe should be honored.” He said title insurance, which is designed for situations just like this, should come into play to protect the homeowners.

Charlotte attorney Robert McNeill, who is representing the title insurance companies, said in an emailed statement that the homeowners are in litigation “due to circumstances they did not create” and that he intends to “fight vigorously to protect their homes.”

“We’re confused about how it’s all actually happening ... why we’re responsible or even involved in it, period,” said Melinda Barber, who bought her Fox Den home in 2008 for $243,000.

Connie Terll, who bought her home in 2008 for about $207,000, said she has begun making a list of everything she owns to determine what she’ll keep and what she’ll get rid of if she loses her home.

“It’s just basically a nightmare,” she said.

Terll, a 68-year-old retiree, said she sold stock in General Motors Co. and also used proceeds from the sale of a home in Daytona Beach, Fla., to pay cash for her Fox Den home. She said she has invested about $20,000 in her property, including landscaping and bathroom upgrades.

“I put everything I had in this house,” she said.

Although she and other homeowners are preparing for the worst, they are vowing not to leave quietly.